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On 17 March 1968 the system that fixed the price of gold at USD35.00 collapsed and the price of gold was allowed to fluctuate. Let’s have a quick look at the chart to see how gold has performed since it floated in 1968.

Since 1968 when gold floated, its price has grown at a CAGR of 7.7%.

Let’s look now at its monthly seasonality.

The following chart plots the average price returns for gold by month since 1968. For example, since 1968 the average return of the gold price in January has been 1.2%.

And the following chart plots the proportion of months that have seen positive returns. For example, in 60% of years since 1968 gold has had positive returns in February.

It can be seen that since 1968 gold has on average been strong in February, September and December. The weak months for gold have been March and October.

This profile of behaviour would seem to have some persistency as the same pattern can be seen for the more recent period 2000-2017, for example the following chart plots the average month returns from 2000.

The main new features recently have been the strength of gold in the months January, August and November, and the weakness in December.

Gold and equities

The following chart shows the ratio of the FTSE All Share Index to gold (priced in sterling) since 1968. One can regard the chart as the UK equity market priced in gold.

The ratio peaked at 18.8 in July 99 and then fell to a low of 2.3 in September 2011. Since 1968 the ratio average is 6.1

The above is an extract from the newly published UK Stock Market Almanac 2018.

Positive returns

The following chart shows the proportion of months that have seen positive returns for the FTSE 100 Index since 1980. For example, the index rose in April in 28 years since since 1980 (76%).

Broadly, the pattern of behaviour has not changed greatly in the last two and a half years. The months which have seen the highest number of positive returns are still April, October and December.

But in recent years, since 2000, February has been getting relatively stronger, while January and March relatively weaker. Since 1980, the proportion of positive return months for January is 59%. but measured from 2000 the figure falls to 35%.

Average returns

The following chart plots the average month returns for the FTSE 100 Index for the period 1980-2016. For example, since 1980 average return in January of the index has been 0.9%

Similar to the previous study, the standout two strong months of the year since 1980 have been April and December. Although since 2000 the performance of December has been dropping off and has been over-taken by October as the second best performing month in recent years.

The months with the lowest (in fact, negative) returns are still May, June and September. Again, things have changed slightly in recent years, with January equal with September as having the worst average returns since 2000.

The following chart is similar to the above (in that it plots the index average returns by month, the short brown horizontal bars), but it adds a measure of the extent of variation away from the average for each month (the measure is 1 standard deviation).

An obvious observation to make is that the variability of returns around the average are very large for all months. The months that have seen the greatest variability (i.e. volatility) have been September and October, and to a slightly lesser extent January. The months with the lowest variabilility have been April and December.

Cumulative returns

The following chart shows the cumulative returns indexed to 100 for each month. For example, £100 invested in the FTSE 100 only in the month of April from 1980 would have grow to £217 by 2016.

This is not meant to represent real-life investable portfolios (e.g. transaction costs are not included), but to illustrate the large effect the returns differences can have on cumulative performance over a long term,

Notes

The superior returns for April and December can be clearly seen on this chart. Indeed, the close correlation of returns for the two months is remarkable, and rather odd. However, as can be seen, due to the recent couple of weak years for December, performance has been diverging between the the two months.

The most striking change in behaviour is undoubtedly that for January. This was the strongest month for the FTSE 100 Index until the beginning of the millennium, since when its performance has fallen off quite dramatically.

In a less dramatic fashion (than January) the returns for November have decreased strongly since 2005.

The months represented by dashed lines are the six months May to October. These lines can be seen to largely occupy the lower part of chart – which supports the Sell in May effect.

[We last looked at this in 2014 in this article; time to update the figures.]

To briefly recap, the original study found that since 1986 the price of oil displayed a seasonality for two parts of the year-

March-Septemberwhen WTI is strong, and

October- February when the WTI price has been relatively weak

Let’s see if this is still the case.

Mean returns

The following chart plots the average month returns of the price of WTI (West Texas Intermediate) for the period 2000-2016.

A two-part pattern for the year is still observable, but the periods have shifted slightly.

As can be seen, since 2000, WTI month returns have tended to be high in the period February to June. The strongest month of the year in this period has been February with an average return in the month of 4.8%.

The weak part of the year has also shifted: to September to January. The weakest month has been November, with an average price return of 3.2%.

Positive returns

The following chart plots the proportion of monthly returns that were positive over the same period.

This pattern of positive returns largely supports the preceding analysis.

Since 2002 WTI has seen negative returns in February in only 3 years.

By contrast, September has seen positive returns in only 6 years since 2000.

The new seasonality pattern can thus be summarised as-

February-Junewhen WTI is strong, and

September-January when the WTI price has been relatively weak

Cumulative performance

The following chart plots the cumulative performance of WTI for two portfolios:

WTI (Strong Months) – this holds WTI in just the strong months identified above (February-June), and is in cash for the rest of the year

WTI (Weak Months) – this holds WTI in just the weak months (September-January), and is in cash for the rest of the year

For benchmarking purposes WTI (continuous holding) and the S&P 500 Index are also plotted. All series are re-based to start at 100.

Starting at 100 in 2000, the WTI (Weak Months) portfolio would have fallen to a value of 16 by 2016. The S&P 500 would have a value of 145, and a continuous holding in WTI a value of 182. But the WTI (Strong Months) portfolio would today have a value of 1047.

This article looks at the monthly seasonality in the price of crude oil (West Texas Intermediate, WTI).

From 1986

The following chart shows the average price change by month of WTI for the period 1986-2014. For example, since 1986 the price of WTI has increased on average 0.5% in January.

From the chart it can be seen that, historically, March, April and August have been strong months for WTI, while October and November have been weak.

Further, we can divide the year roughly into two parts:

March-September when WTI is strong, and

October- February when the WTI price has relatively been weak

The following chart plots the proportion of monthly returns that were positive over the same period. For example, since 1986 48% of the WTI price changes in January were positive.

The pattern here largely repeats that seen for the average returns: the strong months are March, April (with July also being strong), and the weak months are October and November.

From 2000

To assess the persistency of the behaviour, the following chart plots the average price change by month of WTI for the period 2000-2014 (i.e. this is similar to the first chart above, but the starting point is 2000 instead of 1986). .

Roughly, the two-part nature of the year can still be seen in the monthly performance: the WTI price is relatively strong March-August, but the now weak part of the year starts in September, through to December.

The big change in recent years can be seen in the strength of the WTI price in February: since year 2000 WTI has an average price change of +5.4%.

For completeness, the following chart plots the proportion of monthly returns that were positive over the same period.

The euro was introduced as an accounting currency on 1 January 1999, replacing the former European Currency Unit (ECU) at a ratio of 1:1. On 1 January 2002, physical euro coins and banknotes entered into circulation.

The following chart plots the GBPEUR exchange rate from 1975. (NB. The GBPEUR rate has been back-calculated to 1975.)

The month closing high for the rate was 1.9234 in January 1981; and the month closing low was 1.0341 in December 2008.

Monthly seasonality

The following charts look at the monthly fluctuations in GBPEUR.

The chart below shows the average monthly returns for GBPEUR for the period 1975-2014. For example, on average the rate has risen 0.80% in January.

From the above chart it can be seen that since 1975 the strongest month for GBPEUR has been January, followed by April and July. Whereas the weakest month has been September (-1.05%), followed by February and December.

To see if there has been any change to this monthly seasonality since 1999 (i.e. since the euro was introduced as an accounting currency), the following chart plots the average monthly rate changes in GBPEUR for the period 1999-2014.

For this shorter period, it can be seen that January (+1.20%) is still the strongest month followed by, still, April and July (although April has been stronger and July weaker since 1999). On the other side, December (-1.25%) has become the weakest month (September has had close to a zero average change since 1999), with the other week months being November and February.

The following chart plots the proportion of positive returns for GBPEUR for each of the 12 months.

The observations here largely correlate with those for the average changes. Namely, since 1999-

The two strongest months for GBPEUR have been: January and April,

The three weakest months for GBP have been: February, November, December.

For a while after World War II nobody needed to worry about currency fluctuations because currencies were tied to the US dollar under the Bretton Woods system. Exchange controls were in place and some older readers may remember being restricted to taking no more than £50 out of the UK.

But on 15 August 1971 President Nixon announced that the US was ending the convertibility of the US dollar to gold and this led to the end of the Bretton Woods system and fixed-rate currencies – such as sterling – became free-floating.

The following chart shows the fluctuations of GBPUSD since it became free-floating in 1971.

As can be seen, in the decade following 1971 sterling fell against the dollar (almost reaching parity in February 1985); but since then has been broadly trading in the range 1.4-2.0.

Monthly seasonality

The following charts show the monthly changes in GBPUSD for the last 20 years.

The chart below shows the average monthly returns for GBPUSD. For example, on average the rate has fallen 0.39% in January.

The chart below shows the proportion of monthly returns that were positive. For example, GBPUSD has risen in January in 46% of years since 1993.

Observations:

Weak months for GBPUSD have been: February, May, August and November

Strong months for GBPUSD have been: April, September and October

These observations would seem to have some persistency as they are valid for other periods analysed: 1971-2014 and 2000-2014.

The following table shows the month returns for the FTSE 250 Index for every month since the index was introduced in 1986. For example, in January 1987 the FTSE 250 Index rose 9.5%. Negative month returns have been highlighted with a blue cell background.

A quick glance at the above chart suggests that strong months for the FTSE 250 Index have been February, April and December; while weak months have been June and September.

These observations are supported by the chart below which shows the average month returns for each month 1986-2014.

From this chart we can see the FTSE 250 Index has historically been strong the five consecutive months December-April. Its weakest month is September (an average month return of -1.7%), and its strongest month December (+2.8%).

The 2013 edition of the Almanac looks at the historic monthly performance of the FTSE 350 sectors. Here we look at the Oil Equipment, Services & Distribution sector.

The following chart plots the average out-performance of the FTSE 350 Oil Equipment, Services & Distribution sector over the FTSE 100 Index by month since 2006. For example, since 2006 on average the sector has out-performed the FTSE 100 Index by 4.1 percentage points in February.

Observations:

The strongest months have been February and March – the sector has out-performed the market in March every year since 2006.

Although the sector has under-performed the market by an average 1.7 percentage points in September since 2006, it has actually out-performed the market in four of those years and so has not been consistently weak in September.

The 2013 edition of the Almanac looks at the historic monthly performance of the FTSE 350 sectors. Here we look at the Industrial Transportation sector.

The following chart plots the average out-performance of the FTSE 350 Industrial Transportation sector over the FTSE 100 Index by month since 1999. For example, since 1999 on average the Industrial Transportation sector has out-performed the FTSE 100 Index by 2.3 percentage points in January.

Observations:

The strongest month of the year relative to the market for the sector is January, the sector has only under-performed the market in three years since 1999 in this month.

The sector has been relatively weak in July and October, the the sector has only out-performed the market in fours years since 1999 in July.

The two stocks in the FTSE 350 Industrial Transportation sector [NMX2770] are-